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Thursday, September 9, 2010

As there really seems to be light at the end of the tunnel for the proposed new shop in Newmarket I thought I would write something about the process of operating a charity shop from the point of view of a branch committee—there is a lot of frantic activity in the background and it is not simply a matter of finding an empty shop, paying some rent and moving in.

First find your shop:

Potential income from sales has to be balanced against costs, particularly rent. A smallish shop in a quiet area may cost about £11,000 in rent. Something similar in a busy shopping area may be more than three times as expensive, but may pay for itself by attracting a far greater number of shoppers. Very few people will make a special journey to a charity shop if there is nothing else in the location that they need to visit.

If you decide to go for a shop in a busy location you will need to achieve very high volume of sales to make it pay. It may be necessary to organise "trawling" (which is where you distribute collection bags one week and pick them up the next—filled with saleable donated items, you hope). To make a profit will need to sell at least 100 items daily; which will involve a hefty amount of physical work sorting donated goods, cleaning, pricing and putting out on the shop floor. Unless you can field at least two reasonably able-bodied volunteers six days a week it will be impossible to keep up without employing some paid staff. Even with the low sales volume at the old Newmarket shop it nearly finished off the two volunteers who wound up doing the bulk of donation processing in the evening and at weekends.

Once you settle on premises that seem suitable there will be protracted negotiations with the landlord's agent and solicitor. Their job is to get the best possible deal for their client—which means that, if they can persuade you to agree to take on expensive repairs or to ignore that suspicious stain on the ceiling, they will. You have to grit your teeth and rely on the experience and advice of your own solicitor and surveyor, and not let yourself be persuaded that being careful is unnecessary delay. Unlike a residential property commercial landlords have no obligation to pay for repairs unless this is specifically agreed in the terms of the lease.

The amounts of money involved are pretty scary: shop rent is typically paid three months in advance, so for a £20,000 annual rent £5,000 must be found up front. Many landlords will require another three months' rent as a deposit. Unless the shop is already equipped with suitable rails and shelving, there will be at least another £10,000 to pay for fitting out, so £20,000 may have been spent before the shop even opens.

Once you have an agreed lease, two committee members must sign it as "holding trustees". This means they agree to take responsibility for ensuring that the rent is paid and the terms of the lease adhered to. A shop lease is not like an ordinary tenancy of a flat or house—if things don't work out the charity can't simply give a month's notice and leave. I've been one of the holding trustees for three of our branch shops so far, and am not yet bankrupt, but none of this is something to do lightly.

The major attraction of shops is their potential for generating regular income that can be increased by simply working harder. Virtually all other sources of income are at the mercy of the whims of public opinion.

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